Shanghai A collapse in Chinese residential property construction has raised fears of a sharp decline in home prices across the country at a time when economic growth has weakened to a 1½-year low.

The weak environment for property investment saw growth in the first quarter slow to 7.4 per cent, according to figures released by the National Bureau of Statistics on Wednesday.

While the growth number was slightly ahead of market expectations, economists have already begun to question its accuracy. “If you look at monthly indicators then I think growth was really around 7.2 per cent, given retail sales and fixed asset investment have been weak," said the chief China economist at ANZ, Liu Ligang.

The NBS data showed that new housing construction fell by 27.2 per cent over the first three months, compared to the same time last year. “It was a very significant slowdown," Mr Liu said.

New home sales were down 7.7 per cent in the first quarter, while new dwellings waiting to be sold were up 23 per cent from the same time last year.

“We continue to view property sector over-investment as the primary risk to China’s economy in 2014 and 2015," said Zhang Zhiwei, the China ­economist at Nomura.

Reports are already beginning to filter out of steep discounts being offered to revive sales activity.

In the city of Changzhou, north-west of Shanghai, the state media said a price war had broken out among developers offering discounts as highs as 36 per cent from December prices. In Hangzhou, a wealthy city south of Shanghai, the discounts were said to be 30 per cent. Other satellite cities in the Yangtze River delta are reportedly experiencing similar price falls.

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“Extreme downward adjustments in real estate values for emerging economies force a recalculation of the growth rate of the middle class," said Anne Stevenson Yang, the research director at J Capital in Beijing. “Along with that, it forces a recalculation of the steadily growing consumer class in China, not just for residential property, but for everything from cars to carp."

The decline in property investment saw growth in fixed asset investment (FAI) slow to 17.6 per cent in the first quarter. This was 3.3 percentage points slower than the same time last year.

Property investment makes up about 30 per cent of FAI in China.

The spokesman for the NBS, Sheng Laiyun, said China was going through a period of “profound structural reform".

“The property market is generally stable, but the slowdown in property investment did contribute to the slowdown in FAI growth," he told a press conference in Beijing.

Mr Sheng also said that exports grew at about 4 per cent in the first quarter. Official figures showed exports slumped 3.4 per cent over the period, but this was due to last year’s figures being inflated by fake invoicing and hot money flows into China.

Mr Liu from ANZ expects a pick-up in growth during the second half of 2014, but still believes it will be weaker than the government’s target. In March, Premier Li Keqiang set the annual growth rate at “around 7.5 per cent".

While the Premier and his ministers have indicated they will tolerate slower growth, there are signs of the government bringing forward infrastructure projects to bolster the economy. Late last month the government said it would spend 700 billion yuan ($132 billion) on railway projects this year, a slight increase from 2013.